June 26, 2014
Retiree Health Plans Considered
Retiree health benefits are a luxury item.
In 2013, just 28 percent of government and private-sector employers with more than 200 employees offered health benefits to their retiring workers, down from 66 percent in 1988, according to the Kaiser Family Foundation.
These plans are popular with workers, but their declining prevalence has a silver lining.
A long history of research shows that people who can retain their employer health benefits if they retire tend to retire earlier, confident they’ll be insulated from extraordinary medical expenses that could wipe out their savings.
Here’s the silver lining when retirees lose that coverage: by inducing them to remain in the labor force longer, perhaps until their Medicare starts, it improves their retirement security in other ways. Working a few more years means more money in the bank, a larger Social Security check every month, and fewer years in retirement that must be funded on an often-meager amount of 401(k) savings.
For employees with access to retiree health coverage, there’s still something to think about.
The health exchanges are also a help to many retirees losing group coverage. It is also an alternative to COBRA or state benefits continuation. This is especially true for those who can qualify for a premium subsidy (tax credit) based on income.
Still, it is hard to tell retirees their loss of benefits has a “silver lining.” Most will not see it that way.
Between the availability of the exchanges, premium subsidies and continued “dumping” of group health for Medicare eligible coverages, it is no surprise major corporations favored the ACA. In a number of ways, this is another example of passing the buck to govt. to pay i.e. privatizing profits while socializing losses.
Corporate welfare is still welfare. Eventually Elizabeth Warren, Ralph Nader and the Tea Party will realize they share common ground here.
I knew that employers were trending away from providing health and retirement benefits, and moving from defined benefit to defined contribution plans where retirement was offered – – however this trend is much more pronounced than I realized. And it’s quite disturbing.
Silver lining? If employees are unprepared for retirement, perhaps. If they are, it’s just the loss of another valuable benefit.
Retiree health plans are no longer the issue for near-retirees that they once were. Didn’t the CBO recently report that due to the ACA, there won’t be any incentive for near-retirees to continue working? They can go ahead and retire, and collect their meager pensions, being assured that affordable subsidized health care coverage is available, no matter their financial situation.
I can’t believe how much the benefits have dropped in the past 20 years. It is just my luck that I am getting ready to retire in the next couple of years, right when it’s at an all time low. I really hope that my retirement fund keeps me at least somewhat comfortable for these last years of my life.